U.S. CBO says budget deficit to reach $590 billion for fiscal 2016

The U.S. budget deficit is expected to grow to $590 billion in fiscal year 2016 due to slower than expected growth in revenues and higher spending for programs including Social Security and Medicare, the Congressional Budget Office said on Tuesday.

The estimate, which is $56 billion larger than CBO's forecast in March, shows the deficit increasing in relation to economic output for the first time since 2009. CBO said the deficit is expected to be $152 billion higher than in 2015 and will equal 3.2 percent of economic output.

The deficit peaked at $1.4 trillion in 2009 and shrank to $485 billion in 2014.

The nonpartisan research agency also said that debt held by the public will amount to nearly 77 percent of gross domestic product by the end of 2016, three percentage points higher than last year and its highest ratio since 1950.

Click through images of 17 countries with the highest level of debt:

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17 countries with the highest level of gov debt (BI)

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17 countries with the highest level of gov debt (BI)

17. Iceland – 90.2%

Prior to the credit crisis in 2007, government debt was a modest 27% of GDP. At the time of WEF's rankings, its debt was still super high.

(Photo via Getty Images)

16. Barbados – 92.0%

The tax-haven nation is the wealthiest and most developed country in the eastern Caribbean, but its growth prospects look weak due to austerity measures to combat the effects of the credit crisis eight years ago.

(Photo via Alamy)

15. France – 93.9%

The eurozone's second-biggest economy has been recovering "in fits and starts," says the country's statistical agency.

(Photo by Allan Baxter via Getty Images)

14. Spain – 93.9%

S&P is confident that Spain's buoyant growth prospects and labour-market reforms will boost its outlook.

(Photo via Getty)

13. Cape Verde – 95.0%

The island nation is a service-orientated economy and suffers from a poor natural-resource base. This means it has to import 82% of its food, leading to vulnerability to market fluctuations.

(Photo via Getty Images)

12. Belgium – 99.8%

The country is known as "the sick man of Europe," because while the government managed to reduce the budget deficit from a peak of 6% of GDP in 2009 to 3.2% — its debt is still incredibly high.

(Photo via Shutterstock)

11. Singapore – 103.8%

It's one of the wealthiest countries in the world but the island nation suffers from high debt. The government is now trying to find new ways to grow the economy and raise productivity.

(Photo via Getty Images)

10. United States – 104.5%

The US hiked interest rates for the first time in seven years in December last year. In March, Federal Reserve Chair Janet Yellen said the economy was on a path of slow and steady growth.

(Photo via Getty Images)

9. Bhutan – 110.7%

The small Asian economy is closely linked to India and depends heavily on it for financial assistance and foreign labourers for infrastructure.

(Photo via Getty Images)

8. Cyprus – 112.0%

The country's excessive exposure to Greece hit it hard when the European sovereign-debt crisis rippled across the world in 2010. Like Greece, it had to be bailed out by international creditors and enforce capital controls and austerity measures to get funding.

(Photo by Rosita So Image via Getty Images)

7. Ireland – 122.8%

The country exited its bailout programme two years ago but still faces a huge debt pile. But it's on the right track. Ireland has already had success in refinancing a large amount of banking-related debt.

(Photo via Getty Images)

6. Portugal – 128.8%

Portugal exited its own bailout programme in the middle of 2014. However, GDP was still 7.8% lower than it was at the end of 2007.

(Photo via Getty Images)

5. Italy – 132.5%

The country's proportion of debt to GDP is the second highest in the Eurozone.

(Photo via Getty Images)

4. Jamaica – 138.9%

The services industry accounts for 80% of GDP, but high crime, corruption, and large-scale unemployment drag the country's growth down. The International Monetary Fund said Jamaica has to reform its tax system, among other things.

(Photo via Getty Images)

3. Lebanon – 139.7%

The country used to be a tourist destination but war in Syria and domestic political turmoil have led to a lack of an official budget for months.

(Photo via Getty Images)

2. Greece – 173.8%

The country has taken over €320 billion worth of bailout cash and it's looking increasingly impossible to pay it all back — especially since it has had to implement painful austerity measures to get its loans. But it's surprisingly not the worse country in the world for government debt.

(Photo by Konstantin Kalishko via Getty Images)

1. Japan – 243.2%

The country is in a troubling spot. Its economy is growing very slowly and now the central bank has implemented negative interest rates.

(Photo via Getty Images)

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The 2016 federal fiscal year ends Sept. 30.

Revenues have increased by less than 1 percent in 2016, while government outlays are predicted to rise by 5 percent as a result of mandatory spending for Social Security and Medicare, the federal retirement and healthcare programs for the elderly.

The CBO said the forecast indicates tepid U.S. economic growth of only 1 percent for the first half of calendar year 2016 but predicted the economy would expand more robustly in coming months and create growth of 2 percent for the year and 2.4 percent for 2017. Faster growth will spur hiring, increase wages and put upward pressure on inflation and interest rates.